Panel Calls for Overhauling Student Grants

A blue-ribbon panel is calling for an overhaul of the federal Pell-grant program for low-income college students, reflecting concerns that not enough of the award recipients end up graduating.

A blue-ribbon panel is calling for an overhaul of the federal Pell-grant program for low-income college students, reflecting concerns that not enough of the award recipients end up graduating. Josh Mitchell reports. Photo: AP.

The report—set to be released Tuesday by a panel of educators convened by the College Board, a trade group of universities and colleges—adds to the debate about federal student-aid programs, which have grown rapidly under President
Barack Obama
.

The president is expected to propose a budget Wednesday that would again spend heavily on grants and loans, despite complaints from some Republican lawmakers and other critics that the programs, which require congressional approval, have become too costly and often ineffective in helping Americans get jobs. The grants are exempt from the sequester, the across-the-board spending cuts that began in March.

ENLARGE

Federal Pell grants, which don't have to be repaid, are the Education Department's biggest expense. The program awarded $34.5 billion in grants to 9.4 million college students in the 2011-12 academic year. Spending is up by 84% since 2008-09, after adjusting for inflation, and the number of recipients has risen 52% since then.

The awards, which averaged $3,685 last year, are designed to help students from low-income families pay for tuition and other college expenses. They can be used at public, private and for-profit institutions. But dropout rates among recipients are high, leading to criticism that much of the money is being wasted. A quarter of Pell-grant recipients under age 25 who enrolled in the 2003-04 year earned a bachelor's degree within six years, according to the report. Among students 25 and older—whose numbers have grown during weakness in the job market—the rate was only 3%.

What's a Pell Grant?

A federal program awards Pell grants to needy students, almost always undergraduates

Maximum award: $5,550 a year

Average award: $3,685 in the 2011-12 academic year

Recipient age: Most are under 25, but a growing share—44% in 2010-11—are older.

Eligibility: Award amount is determined by schools, which consider a family's ability to pay for education based on income and other factors.

Source: WSJ research

The study recommends changes designed to steer funds to the neediest, away from some moderate-income families, while also improving students' chances of graduation. Colleges would determine a student's need and eligibility based on Internal Revenue Service data. Currently, colleges must independently verify a family's self-reported income and assets, a process that educators say is inefficient and can lead to fraud.

Education experts point to various reasons for the low graduation rates of Pell-grant recipients. Low-income students are often more likely to drop out because they grew up with limited education resources and are less prepared than their peers for college. Also, many students, even with the grants, must work part-time or even full-time to cover living expenses. That limits their time for studying, and many often drop out so they can work more.

The report recommends giving bigger grants to students who take more courses in a given semester and who attend summer sessions, to encourage speedier attainment of a degree.

The study also calls for different eligibility criteria and other rules for two groups—those 24 years old and younger, and students aged 25 and older.

Students in the older group would get more targeted, one-on-one counseling sessions at independent career centers. The idea is to advise people who are often switching careers and plan to get associate's degrees, rather than bachelor's, to pick up skills quickly to re-enter the labor force.

The counseling would cost an extra $900 million annually, according to the report—funding that would need approval from Congress.

People 25 and older represented 44% of Pell-grant recipients in the 2010-11 year, according to the College Board. Many are workers who have been laid off or are seeking to change careers but have little guidance about what to study, said
James Jacobs,
president of Macomb Community College in Michigan, who served on the panel. Those students are among the likeliest to drop out.

"They're often desperate" and hastily enroll in schools with low graduation rates, Mr. Jacobs said. The counseling centers would advise students about which schools are most affordable and effective, as well as the job prospects and income potential of given fields, he said. "They're encouraging you to get into programs that will lead you to a job."

Sandy Baum, an education consultant who headed the panel that produced the report, said many older Americans who go back to school don't have access to guidance counselors that are available to high-school students. "The evidence suggests it would change the path that a significant number of students take," she said.

The report is among a batch of reports produced in recent months and funded by the Bill and Melinda Gates Foundation to produce ideas for overhauling student-aid programs. The Lumina Foundation, a private foundation that advocates for higher education, also provided funding for the report by the College Board, which is a not-for-profit membership association of educational institutions that also conducts research.

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